Friday's Brexit induced market volatility caused many of the high-yield REITs to show their true colors. Many of the safest ones actually gained on Friday acting as a "safe haven" as the rest of the market sold off. This week's Blue Harbinger Weekly is a continuation of our free report titled "Seven Big-Dividend REITs Worth Considering." Specifically, we provide all the details (and full reports) for our Top 3 REITs. And our new Investment Idea this week happens to be an attractive high-yield REIT included in the Top 3.
Chatham Lodging: An Undervalued Big-Monthly-Dividend Hotel REIT
Chatham Lodging Trust (CLDT) is a hotel Real Estate Investment Trust (REIT) with a big 6.1% dividend yield, and significant price appreciation potential. The market has dramatically overreacted to slowing growth among hotel REITS, and Chatham in particular offers an attractive investment opportunity for long-term income-focused investors because of its attractive valuation and potential for more dividend increases.
A Tale of Four Stocks: There Will Be Winners and Losers
This week we review four stocks. First we review one of our stalwart blue chip holdings that is currently trading at a discounted price thereby providing an attractive entry point for long-term investors. Next, we provide a checkup on an attractive small cap growth company we own that provides cloud-based payroll processing services, and has the potential to easily double in price and/or get bought out at an attractive premium. And finally, we provide some additional insights on Yahoo and how the stock price of its eventual acquirer could first fall and then rise significantly.
Why American Express Could Rise 30%
The bad news for American Express over the last 18 months has been large and steady. And so too has the share price decline. We believe the bad news is now in the rear view mirror (knock on wood), there is good reason to be optimistic, and the shares could easily rise 30%. We own shares in our Blue Harbinger Disciplined Growth portfolio.
Part 2: 50 High Yield Investments Down Big Friday: These Five Are Worth Considering.
This past Friday (6/10) was not a good day for high yield stocks as the market was in a risk-off mood. For example, the following table highlights the large 1-day declines of fifty stocks that currently yield over 5%. However, we believe five of the companies, in particular, offer attractive investment opportunities for income-seeking investors.
Vanguard Bond ETF (BND) - Thesis
Vanguard Bond ETF (BND)
Rating: BUY
Objective: Steady Returns, Low Volatility, Diversification
The Vanguard Total Bond Market ETF (ticker symbol: BND) is a great way to add low risk diversification to a long-term investment portfolio while simultaneously earning relatively attractive low-risk interest payments (currently 2.06%). This ETF holds over 8,000 bonds (so you get plenty of diversification) and they’re all high quality (investment grade). The ETF is managed by Vanguard (a very trusted name in the industry), so it charges an extremely low management fee, only 0.06%. For perspective a typical bond fund charges 0.82% (according to Vanguard) and this difference really adds up over time. This ETF is appropriate for medium- to long-term investors, and we really like it because it is a fantastic complement to the stock ETFs within our Blue Harbinger Smart Beta strategy.
Traditionally, as a base case, many long-term investment portfolio start with a mix of 60% stocks (equities) and 40% bonds (fixed income). And then they increase the allocation to stocks if they can handle more volatility in exchange for higher long-term expected returns. Or they increase the allocation to bonds if they want less risk (albeit with lower long-term expected returns). We have allocated 20% of our Blue Harbinger Smart Beta strategy to bonds (via this Vanguard Bond ETF), which may be considered slightly higher risk compared to a more traditional 60% stocks / 40% bonds portfolio. However, with the long-term investment horizon of the Smart Beta strategy, we’re comfortable with the risk and higher long-term expected returns.
This is an ETF (BND) that can be held for a very long time (as long as nothing goes wrong with Vanguard, the company that manages it). We trust Vanguard, we love the low fees, and we believe this is a great way to gain broadly diversified expose to the high-quality bond market.
Railroads, Bonds and Utilities Stocks
This week’s Blue Harbinger Weekly covers three exciting topics. First we discuss a railroad stock that we really like a lot right now (and yes, we own shares, and no, it's not the BNSF shown in the picture). Next, we review the new fixed income purchase in our “Smart Beta” strategy, and why we believe it’s a very intelligent way to play bonds. And finally, we discuss our plan of action for our utility stock holding which is already up over 30% this year.
Union Pacific: Back on Track with Room to Run
After suffering significant stock price declines from over $120 per share in early 2015, to around $67 in January 2016, we believe Union Pacific is back on track, and it has significant upside price potential ahead. The market is overly pessimistic, the market cycle is slowly beginning to turn, and the dividend (2.5%) is attractive. If you are a long-term investor, Union Pacific is worth considering. We own it.
AstraZeneca: Big Dividend, Big Long-Term Prospects
We are contrarians with regards to AstraZeneca. Whereas the market consensus is becoming increasingly negative (the stock is down 12.4% this year while the S&P 500 is up 2.7%), we believe the patent loss fears are overdone, and the market is not recognizing the dramatic long-term potential of the AstraZeneca pipeline. If you are a diversified long-term income-focused investor, AstraZeneca is worth considering.
Top 10 HIgh-Yield Investments
In a continuation of our free report "20 Big Yield Investments Worth Considering," this week's members-only Blue Harbinger Weekly reviews the top 10. We provide detailed reports for each, and we do currently own five of the top ten companies. And on a completely separate note, you may have noticed that we updated performance through May, and we continue to outperform the market in each of our three separate strategies. Without further ado, here are the Top 10 Big Yield Investments Worth Considering...
OneBeacon: 10 Reasons to Own this Big Yielder
OneBeacon (OB) is a boring, low beta, low volatility, property & casualty insurance company that offers a big safe dividend yield (6.4%). Because of the nature of its business, it is a great diversifying “widows and orphans” stock, and it that can be very valuable within the constructs of a diversified, income-focused investment portfolio. The stock is down 8.5% in the last year while the S&P 500 is essentially flat over the same time period, thus creating a more attractive entry point for long-term, income-hungry investors.
CenturyLink: Big Dividend (7.9%), Attractive Price
CenturyLink is a big dividend (7.9%) telecom stock that is trading at an attractive price. The stock has been beat up over the last month (Mr. Market didn’t like earnings) and over the last several years (it cut its dividend in 2013, and market volatility has increased). We believe the market is overly negative on this stock, and now is a compelling time to add shares because the price is down, the valuation is attractive, and the dividend yield is outstanding.
Top 5 Donald Trump Stocks Worth Considering
This week's Blue Harbinger Weekly is a continuation of our free report titled Ten Donald Trump Stocks Worth Considering. Specifically, we provide detailed reports for each of the top five stocks. We believe each stock offers a particularly attractive dividend yield and significant price appreciation potential. Without further ado, here are the top 5 Donald Trump stocks worth considering...
Top 3 Big-Dividend Preferred Stocks
This week's Blue Harbinger Weekly reviews three top big dividend preferred stocks. They all offer large dividend yields and significant price appreciation potential. This report is a continuation of our free report titled Five "Good" Big-Dividend Preferred Stocks.
Big Dividends: Preferred Stocks, Caterpillar & More
This week’s Weekly covers three exciting big-dividend topics. First, we review an exceptional preferred stock investment opportunity. This one’s dividend is over 11%, and we’re covering it because Blue Harbinger member Sherry S. asked us to cover more preferred stocks. Next, we revisit Caterpillar and its big 4.4% dividend yield per a request from Blue Harbinger member Harry B. And finally, we do a brief post-trade review of the six new stocks we purchased last week in the high-yield portion of our Income Equity strategy (the average dividend on these new purchases exceeds 10%).
New Trades and Top Five Big Dividend Stocks
We have multiple exciting updates in this week’s Blue Harbinger Weekly. First, we’ve placed several new trades in the Blue Harbinger Income Equity strategy bringing the portfolio's aggregate dividend yield to over 5.0%. Second, in a continuation to our public report Nine Big Dividend Stocks Worth Considering we have included detailed reports for each of the Top Five Big Dividend Stocks (and yes, we do own all five in in the Blue Harbinger Income Equity strategy).
Williams Partners (WPZ) - Thesis
New Residential Investment Corp (NRZ) - Thesis
Prospect Capital (PSEC) - Thesis
We have initiated a position in Prospect Capital as its price has pulled back 4.5% over the last two weeks. Prospect capital is a Business Development Company (BDC) with a big dividend yield (13.5%), low volatility, and a cost of capital that is lower than its return on capital. We value Prospect with a dividend discount model and some very conservative assumptions.
Tsakos Energy Navigation (TNP) - Thesis
We have initiated a position in Tsakos Energy Navigation (TNP) as the shares have declined 9.1% in the last two weeks. Tsakos is a Greek company (Athens) that trades on the New York Stock Exchange. It is a provider of international seaborne crude oil and petroleum product transportation services. Tsakos makes more money when oil prices are low (as they are now), it pays a big dividend (currently 5.4%), and it has a lot of upside potential considering the market is not yet giving it nearly enough credit for its rapidly growing net income.